Deposit agreements are becoming increasingly common in residential property transactions across Scotland. They offer a clear and legally binding way for parties to record how sale proceeds will be divided once the property is sold – especially when one party contributes more than the other to the purchase price.
These agreements provide a practical and effective way to determine how the sale proceeds will be split or what steps are to be taken if one party wishes to buy out the other's share in the property.
At James & George Collie, we can provide advice on all aspects of deposit agreements, including:
- What is a Deposit Agreement?
- Who Should Consider a Deposit Agreement?
- When Should a Deposit Agreement Be Created?
- What Does a Deposit Agreement Contain?
- Are Deposit Agreements Legally Binding?
If you would like to enquire further about creating a deposit agreement, please get in touch with our team today.
What is a Deposit Agreement?
A Deposit Agreement is a legally binding agreement between parties who are purchasing a property together and wish to determine how the net sale proceeds are divided. They typically outline each party’s contribution to the purchase price and any fees and outlays incurred. They detail how the parties wish the proceeds of sale to be distributed once the property is sold. For example an agreement could detail that each party receives back their original contribution to the initial deposit of the property, with any surplus split equally. It can also include provisions of what would happen if the parties separate, or one party wishes to buy out the other.
Who should consider a Deposit Agreement?
A Deposit Agreement is commonly used by parties purchasing a property in joint names. Whilst there can be more comprehensive agreements available, such as cohabitation agreements and pre-nuptial agreements, many couples purchasing together may wish to progress with a simple Deposit Agreement. They are particularly useful for unmarried couples or first-time buyers where one person is contributing more towards the deposit than the other.
When Should a Deposit Agreement Be Created?
Ideally, a Deposit Agreement should be put in place at the time of purchase. However, it is still possible to enter into an agreement after the property has been bought, particularly if circumstances change (e.g. one party wants to formalise the arrangement after contributing more to the mortgage or renovations).
What Does a Deposit Agreement Contain?
A Deposit Agreement can be tailored to suit the specific circumstances of the parties involved. A typical agreement would set out:
- The amount each party has contributed towards the deposit.
- How the net proceeds of any future sale of the property will be divided.
- How any associated costs of the sale, such as legal fees and outlays, will be shared.
The agreement can also include provisions for what should happen if the parties separate—for example, if one party wishes to transfer their share of the property to the other in exchange for a financial consideration.
Are Deposit Agreements Legally Binding?
Yes. A properly drafted Deposit Agreement is legally binding. It is important that each party carefully considers the terms of the agreement and ensures they are entering into the agreement freely and with a full understanding of its implications. To protect their individual interests, it is strongly recommended that each party obtains independent legal advice before signing the agreement.
Contact our residential conveyancing solicitors based in Aberdeen & Stonehaven Today
For information and advice on preparing a Deposit Agreement tailored to your personal circumstances, or on any other property law related matter – our experienced solicitors can help.
Our conveyancing solicitors are friendly and approachable –if you have any questions throughout your business with us, we are always available to discuss these matters with you, and we offer a direct line to our partners should you require it.
Call us on 01224 945594 or complete our online enquiry form.